What do you think of when I say the words industrial policy? Kind of sounds like jargon, right? But it's actually way more than that.

Industrial policy is basically a guide designed by government to help shape the economy so it works better.

It's about encouraging innovation, boosting productivity, and helping the country or province grow.

It used to relate mostly to manufacturing, but people talk about it now in terms of all kinds of sectors.

We know the province is focusing on automotive, EVs, AI and more.

But could an industrial policy help us become more globally competitive and could innovation drive it?

I asked David Wolfe, professor emeritus of political science at the University of Toronto and co-director of the Innovation Policy Lab at the Munk School of Public Policy and Stephany Lapierre, founder of and chief brand officer at Tealbook, a supply chain software start-up. David. Stephanie, welcome to The Rundown. How are you guys doing?

>> Extremely well. Yeah. Good. Thanks for having us.

All right, David, now that we understand what industrial policy is, why is industrial policy important?

>> We're living in a different era than we did in the 20th century. Even the beginning of the 21st.

And more and more countries are moving up the scale in terms of the complexity of the products they produce, the export markets they're penetrating into.

And many of these countries have used industrial policy to get to where they are today. If we want to keep up or stay ahead, we need to use the same policy tools.

Can you grade Canada in terms of its industrial policy? When we take a bigger picture.

>> Canada doesn't have an industrial policy, neither does Ontario, so it would be very hard to grade them.

Ontario Ontario created an industrial policy framework in 1992 that I was involved with to the best. It lasted 3 or 4 years and the next government got rid of it, and that's the last time we've tried to do anything on that kind of scale.

All right. We'll get back to that. Stephanie, you are the founder and chief brand officer of Tealbook. What does your company do?

>> So I'm trying to simplify this.

>> For the non-tech people.

>> Yeah, yeah. So we're a data company. So we focus on data. And we were one of the first companies in Toronto to use AI to collect data on businesses.

So what it means is if a company, an enterprise has buy goods and services, they're buying from companies, and there's a lot of information to collect from those companies to manage finance and supply chain and procurement and risk.

But right now, they're usually asking those providers to put information into portals. And so our technology collects all the information.

We've created a very high quality and credible foundation of 230 million verifiable businesses.

And we're connected to countries registries. So it's like if you're a business and you register with a government and get a tax ID number, we connect it to that.

And that allows our customers to have a really good picture and all the information they need to do business with suppliers to manage risk or optimise what they're spending money on, or decide if they're going to buy more locally or, you know, trying to bring new suppliers from, you know, external.

>> So procurement is the big sort of.

>> So we've been focussed on procurement but data touches finance. It touches like if you're in risk and compliance in a company, you need to understand your supplier base so that you can monitor risk much better.

You can also ensure that you're reviewing those suppliers on a consistent basis. So data is really important.

And finance you're paying suppliers. So it's really important you're paying the right suppliers and you're not paying them twice.

And supply chain you need to understand the risk and the potential disruption to your business.

So there's a lot of reasons why everyone in the company that touches third party providers would need data.

I imagine I'm hearing money here because I'm thinking for a lot of these companies, efficiency is important when you're thinking of the company itself. But the manufacturers tell me a little bit about sort of the importance of being an efficient company.

>> Yeah. I mean, if you think just of the problem that we solve, we typically say that a company that has 6000 suppliers, which for us it would be a small customer and $1 billion in spend, which again, would be a small customer would be probably wasting about 8 to $10 million a year just managing data because everyone's doing their own thing with the with the same suppliers and asking the same suppliers to come into different places, different doors in the company.

And so that's just wasting a lot of time.

And then there's no collective brain on who do we do business and where is this data stored that everyone can access.

And so there's really limited visibility into like how do you optimise an enormous amount of dollars going through the company to, you know, improve your margins or drive more competitiveness from your supply base?

Okay, David, we've come a long way with technology, as we can hear just from from Tealbook example there. What effect has the adoption of technology and AI had on industrial policy?

>> It can be the object of industrial policy. The thing to remember about information technology over the last 20 to 30 years, and now AI, is that it's transforming virtually virtually every industry, every sector of the economy.

There's no sector, as Stephanie's example makes really clear, there's no sector of the economy that's not touched by what technology can do. And now what AI is doing.

We haven't had we've had policies to support research on AI. We've had policies to support training students to, you know, learn AI, to program an AI. But we haven't had an effective policy to diffuse AI out into the broader economy.

We haven't had that at the federal level. We haven't had it at the provincial level.

The feds are currently touting their $2 billion spend to buy more compute power for companies to use AI.

Individual US companies are spending open AI and Nvidia. These companies are spending $50 billion a year on on their compute power. What we have from the governments is minuscule.

Stephanie. On that note, the Ontario government has made investments in AI and innovation. In your view, is there enough support to ensure industries like yours can remain competitive?

>> I'm going to be trying to be political, so we were involved in some of the programs that the government had put in place around. AI was a big investment with millions and millions of dollars.

We didn't benefit from it. The the complexity of navigating the program was so challenging.

And, and, and there was no real commercial value. So as a start-up company, you know what? You have time. You don't have a lot of time and money runs out.

And so you need to focus your effort on winning customers. And when you add all this layers of complexity and who owns the IP and how can you commercialise the asset and that's unsure then then it's losing its purpose and it doesn't benefit. Start-up companies like ours.

We've benefited from programs like shred that gives us tax benefit from investing in technology, but it's not necessarily specific to AI.

And although we are an AI company based in Toronto, it's been very difficult to get funding and unnecessarily difficult, I would say, even though there are programs.

>> What about the private sector in terms of funding?

>> Yeah, I mean, we're private company from the government. I mean, we win customers, right? And they give us revenue, and that's how we get.

>> The funding. Private investors.

>> For VCs, right? We've we've raised capital. And so that's helped us build the technology to then be able to generate the revenue.

So those are the two ways. But you know having our government, especially when AI has been a huge driver for Canada and we've lost our position, I think that a lot of the policies that could have been in place to accelerate the Canadian adoption and investment in AI could have put us in a much, much more competitive place globally.

All right, David, I'm gonna get you to pick up on that. But I should mention we have a statement from the office of the Minister of Economic Development, Job Creation and Trade.

Our government is creating the conditions for Ontario's tech businesses, innovators and workers to thrive. To support this growth, we have invested $107 Million in Ontario's critical technologies initiatives to provide access to and drive the commercialisation of technologies that will propel the next generation of innovation and ensure our businesses remain competitive. That includes support for the Ontario Centre for innovation and the Vector Institute.

So with all that being said.

>> The they have done some things not enough, but the question is do they have a strategy?

Do they have a strategy that everyone understands that all of the firms in the relevant sectors understand?

Is it a strategy that's been based on input from those firms? The economists and policy experts who study these things differentiate between old industrial policy, which was all top down government directed, and new industrial policy, which is much more participatory, collaborative, that involves firms in the sectors that are going to be affected by the policies in helping design and implement them.

We don't do that in this country, and we certainly don't do it in this province.

And a lot of what we do is very reactive. A company will say, well, we're interested in investing in Ontario. Can you help us?

And then the government will put together a package of support, particularly in the automotive, but occasionally in other sectors as well.

But we don't lay out a strategy.

>> Is there a difference in laying out a strategy or writing that strategy down on paper? Is there a difference in in having it on paper?

>> It doesn't matter whether it's on paper or whether it's digital. It needs to be communicated to the people you want to, you know, attract and and grow in this jurisdiction.

The other thing that industrial policy does that one off individual policies don't do, it looks at what we call the policy mix.

That is, what is the broad spectrum of policy instruments that the government has available to it. Tax policy, direct spending, regulatory policy, procurement.

And how how do you put together those that mix of policies to deliver the maximum benefit to the companies that you're trying to grow in Ontario?

All right. With that being said, let's take a broader look. Are there any international markets that we can compete with?

>> We can't compete head to head with China. We can't compete in head to head with the US because of our size, because the the size of our companies.

What we can do is target niche markets where we develop specific expertise, which is exactly what Stephanie is doing.

And there are other software companies in Canada and Ontario that are doing the same thing.

And then we need to focus on those niches where we have distinctive research expertise that companies can take and deploy.

And then we need to look at the mix of policy instruments that we can mobilise to give those companies the support they need to penetrate those international markets.

Because, simply put, Canada's market is too small to grow an international technology company to scale.

>> Can you give us an example?

>> Countries where.

>> We have examples?

>> Yeah, we can be selling to Europe, we can be selling into the US. We can be selling to parts of East Asia. We certainly can be selling a lot more to India than we do.

India is probably the largest, largest population in the world now. So one of the largest markets are foreign relations with India have not been the best for the last few years, but I believe the government is working hard to rectify that. That would be a huge market for us.

Stephanie, what do companies like yours? We talk about the niche markets, smaller markets. What does your what does your company need to remain competitive customers?

>> That's the only thing that matters, right? My view is like, you know, there's a lot of obviously we have to raise capital.

In my case, this was a big investment in the tech. So we've raised about 70 million USD.

And so we need to raise the capital. But the proof points come if there's a fit and you're building a technology that's solving a real problem, you win customers.

The customers are paying you money. They give you feedback. You build better product that attracts more customers, that gives you money.

And then investors are really attracted to your company and then they build better product.

And so, you know, the one key driver and I've said this a lot from the public sector because we were really fortunate in Covid. We won the UK government.

We won. We worked with the Department of Defence in the US, but we never won Canada.

And it was not by lack of trying, but there's so much lobbying for the company and trying to get through to get a contract or solve real problems because supply chain was a real problem and we were in the UK able to set them up within 48 hours, with 60,000 manufacturers of PPE, ISO certified.

With the history of how long they've been in business with their contact information.

And so they could start, you know, going from being in the front of the paper, buying PPE from random companies to actually making sure that they're buying companies that met standards.

And, you know, we try to advocate to get Canada to look at us as an opportunity to start looking for goods and services and either locally or outside the Anand.

And it was impossible to work with our government. And so there's so much, you know, effort you want to put in.

I'm better off winning the Kraft Heinz of this world and the, you know, Goldman Sachs of this world versus trying to knock on a door that makes it very difficult for tech companies to work with its government.

Okay. We'll come back to that. David.

>> Can I just follow up on Stephanie's point? Because we've interviewed tons of technology companies in Ontario, and Stephanie's story is one that I hear over and over again.

Okay, we do not. So so in my field of study, we differentiate between supply side industrial policies and demand side industrial policies.

And one of the most valuable for for companies, for start up and scale up companies is government procurement.

We heard over and over again, you know, when I go into an international market, the first question they ask me is, well, who are you selling to in your home country, including your governments or your telcos or your banks?

And I hear the story over and over again that these companies have to make their first sale internationally before they can get anyone in Canada to pay attention, and getting their governments to, to purchase.

And by governments, you know, we don't just mean the actual government in Ontario, we mean the whole college, university, hospital, social services, municipal sector as well.

Those are huge purchasers, the crown corporations, those are enormous markets.

And if we could leverage their purchasing power to support companies like Stephanie's, we'd be a long way down the road towards having an effective industrial policy.

Well, we know we're in a time right now where the sentiment is sort of changed, where there is, you know, elbows up by local. I want to stick with you, David. The Buy Ontario Act for procurement, is this the right move to support?

>> It's a step in the right direction. But but if it's just if it just applies to the Ontario government, it doesn't apply to the broader public sector in Ontario.

If it is, say, targeted to housing, that's great or targeted to infrastructure. But if it's not targeted to all sorts of technology products that the government itself is using or that the broader public sector is using, then it's only, you know, a first step towards where we need to go.

>> And just to add to that, we were talking about the best way to drive behaviour and change is through policies.

And we've seen, you know, in the US, for example, and I know there's a love and hate relationship right now, but a good example is that companies are driven to buy local or buy from minority owned businesses due to tax incentive, for example, or we have customers who have venture debt attached with an interest rate, depending on how much money they're spending with minority owned business and local businesses.

So these are data points and report that they have to provide to their board level to their shareholders.

So it does drive change.

But if you don't have that it's just a sentiment that's Buy Canada because we're Canadian. It doesn't drive change in the way say, hey, we will give you tax incentive or we will, you know, give you some reduction in some of your, you know, venture debt so that you can, you know, to drive change.

And so that's how I think we could enforce change. now Stephanie you're a Canadian company but most of your clients in th US correct? That's right

so let's take out sentiment throw that ar the aside, throw legislation at the side even if there was any of that in place is it still feasible to do something like that? In Canada? in Canada

I think so like the policy making of encouraging Canadian companies. The public sector 100% because it sets the example especially if theres accountability, right

because you can say that but if there's no accountability then when we've seen this in the papers but also from the private sector, those are the big dollars as well that are you know a lot of opportunities for them to adopt Canadian tech and that gives us logos and it gives us customers again and gives us the ability to attract talent and hire people as well so you also get some additional funding so.

Ya I think absolutely that would be a huge driver for adopting local tech, local businesses and spend here in our country.

>> David, you got the last word here.

>> Okay. So we've we've interviewed over 100 companies in Ontario that are trying to scale.

So they're at probably the same stage that Stefanie's company is they're out of the gate. They're past start-up. They want to grow. They want to expand into international markets.

And we asked them, what do you need in terms of policy support to help you scale to penetrate those global markets?

It's the same three things over and over again: access to capital, access to talent, access to markets and where.

And we're we have bits and pieces both federally and provincially on all of them. But we don't have nearly enough.

And where in Ontario last word right now is really deficient. Is the access to talent part.

Ontario is spending the least amount per capita on its post-secondary education system.

It's the students from that system that are going to go feed Stefanie's company and companies like hers.

And if we can't prioritise the talent pipeline for for those technology companies, we are going to have an even bigger problem five, ten years down the road

All right, we are going to have to leave it there. Stephanie. David, I really appreciate. Thank you so much for your insights.